Singapore is known for its robust and business-friendly environment, making it a popular destination for entrepreneurs and small business owners.
However, like any other country, small businesses in Singapore are subject to various taxes. Understanding these tax obligations is crucial to ensure compliance and financial stability.
Goods and Services Tax (GST)
The Goods and Services Tax, commonly referred to as GST, is Singapore’s equivalent of the Value Added Tax (VAT) in many other countries.
GST is a consumption tax levied on the supply of goods and services in Singapore – rated at 8% as of writing.
Small businesses in Singapore are generally required to register for GST if their annual taxable turnover exceeds S$1 million. However, if a small business expects that its annual taxable turnover will not exceed S$1 million, it can voluntarily register for GST.
Once registered for GST, businesses must charge and collect GST on their sales and report it to the Inland Revenue Authority of Singapore (IRAS) in their GST returns. They can also claim input tax credits on the GST paid for their business expenses.
Corporate Income Tax
Small businesses in Singapore are generally structured as private limited companies. These companies are subject to corporate income tax, as of writing, the corporate tax rate in Singapore is 17%.
However, Singapore offers various tax incentives and exemptions to encourage entrepreneurship and business growth.
One of the most notable incentives is the partial tax exemption, where existing small businesses enjoy a lower tax rate on their chargeable income.
Additionally, newly incorporated companies may benefit from a 75% tax exemption on their first S$100,000 of chargeable income and a further 50% exemption on the next $100,000 for their first three years of assessment.
It’s essential for small business owners to keep proper records of their financial transactions and report their income accurately to the IRAS.
Personal Income Tax
In Singapore, small business owners who operate as sole proprietors or partners in a partnership structure are considered self-employed individuals.
As such, they are subject to personal income tax on their business profits. The personal income tax rates in Singapore are progressive, with higher income levels incurring higher tax rates. Small business owners must report their business income as part of their personal income tax return.
Property Tax
If your small business owns property in Singapore, you may be subject to property tax.
Property tax is assessed on the annual value of the property, and it is payable by the property owner or tenant. The tax rate varies based on the property type, and it is important to understand your property’s classification and the applicable tax rate.
Stamp Duty
Stamp duty is applicable to certain transactions, such as the sale and purchase of properties and the transfer of shares. Small businesses may encounter stamp duty obligations if they engage in these types of transactions.
Work with Murdoch Corporate Services on your tax filings
To ensure compliance and manage their tax obligations effectively, small business owners should maintain accurate records, stay informed about tax incentives and exemptions, and consider seeking professional advice when needed.
Work with us to ensure you’re compliant with regulations and are able to manage your cashflow alongside your taxes when operating your business.
